The following table sets forth data related to our net interest revenues:
| 2003 increase (decrease) from 2002 | ||||
| in € m. (except percentages) | 2003 | 2002 | in € | in % |
| Total interest revenues | 27,583 | 35,781 | (8,198) | (23) |
| Total interest expenses | 21,736 | 28,595 | (6,859) | (24) |
| Net interest revenues | 5,847 | 7,186 | (1,339) | (19) |
| Average interest-earning assets1 | 736,046 | 781,134 | (45,088) | (6) |
| Average interest-bearing liabilities1 | 683,127 | 729,643 | (46,516) | (6) |
| Gross interest yield2 | 3.75% | 4.58% | (0.83) ppt | (18) |
| Gross interest rate paid3 | 3.18% | 3.92% | (0.74) ppt | (19) |
| Net interest spread4 | 0.57% | 0.66% | (0.09) ppt | (14) |
| Net interest margin5 | 0.79% | 0.92% | (0.13) ppt | (14) |
| ppt – percentage points | |
| 1 | Average balances for each year are calculated based upon month-end balances. |
| 2 | Gross interest yield is the average interest rate earned on our average interest-earning assets. |
| 3 | Gross interest rate paid is the average interest rate we paid on our average interest-bearing liabilities. |
| 4 | Net interest spread is the difference between the average interest rate earned on average interest-earning assets and the average interest rate paid on average interest-bearing liabilities. |
| 5 | Net interest margin is net interest revenues expressed as a percentage of average interest-earning assets. |
The vast majority of the decline in total interest revenues and total interest expenses was due to the overall decline in interest rates in the marketplace. In fact, the average rates we earned and paid on interest-bearing instruments decreased by 18% and 19%, respectively. The remainder of the decrease in total interest revenues and expenses was the result of lower balances of interest-bearing instruments, primarily related to the planned reduction of our loan exposure, which declined by 44% from December 31, 2002 to December 31, 2003.
The € 1.3 billion decline in net interest revenues from 2002 is attributable to a number of factors, primarily the sale or merger of businesses and assets, the decrease in our loan book as we continue to reduce our overall risk positions and the negative effect of lower interest rates on our reinvested deposit balances.
Average interest-earning assets declined by € 45 billion from 2002 to 2003. Average loans outstanding were € 166 billion in 2003, a decline of € 63 billion from 2002. A € 41 billion decline in average loans to German borrowers was due largely to the full year effect of deconsolidating the EUROHYPO business, which was deconsolidated in the third quarter of 2002. Average loans to non-German borrowers declined by € 22 billion largely as a result of de-emphasizing the traditional lending business. Average securities available for sale and other investments declined by € 22 billion, or 40%, mainly in Germany, which was attributable to sales of industrial holdings and the reduction in assets held because of the sale of most of our insurance business in 2002.
The development of our net interest revenues is also influenced to a significant extent by the accounting treatment of some of our derivatives transactions. We enter into nontrading derivative transactions as economic hedges of the interest rate risks of our nontrading assets and liabilities. Some of these derivatives qualify as hedges for accounting purposes while others do not. When derivative transactions qualify as hedges for accounting purposes, the interest arising from the derivatives appear in interest revenues and expense, where they compensate the interest flows from the assets and liabilities they are intended to hedge. When derivatives do not qualify for hedge accounting treatment, the interest flows that arose from the derivatives during any period all appear in trading revenues for that period.